Gibson Co. - Stock Price
Not what you're looking for?
Gibson Co. has a current period cash flow of $1.2 million and pays no dividends, and the present value of forecasted future cash flows is $15 million. It is an all-equity-financed company with 1 million shares outstanding. Assume the effective personal tax rate is zero.
1. What is the share price of the Gibson stock?
2. Suppose the board of directors of Gibson Co. announces its plan to pay out 50 percent of its current cash flow as cash dividends to its shareholders. How can Jeff Miller, who owns 1,000 shares of Gibson stock, achieve a zero payout policy on his own?
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to answer what is the share price of the Gibson stock.
Solution Preview
a. What is the share price of the Gibson stock?
(1.2 + 15) / 1 = $16.2
Expected share price is $16.20.
b. Suppose the board of directors of Gibson Co. ...
Purchase this Solution
Free BrainMass Quizzes
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.